London 16/05/2012 - Base metals came under further downside pressure during Wednesday LME premarket trading, lurching to fresh multi-month lows in most cases, amid continued turmoil in the eurozone.
"Alongside a yet-again firm US dollar, which has profited from Greece’s failure to form a government and thus the prospect of re-elections, weak equity markets are also weighing on metal prices," broker Commerzbank said.
The euro hit a fresh four-month low of 1.2678 against the dollar before holding recently around 1.2705. UK equities, meanwhile, fell to their lowest since December - the stock market rout continued this morning in Europe.
"This has been building up for some time so it is not a surprise that we are seeing CTA and funds selling all commodities - it is not just metals, as gold and oil are not looking clever," a trader said.
Overhanging financial markets and sentiment are the growing concerns of a Greek exit from the 17-strong eurozone, which would trigger further sovereign debt contagion.
Yesterday, the country failed to reach a coalition agreement and announced that new elections will have to be called. Today Greek leaders will seek an agreement on an interim government that will schedule these elections.
As well as the European political turmoil, there are data events later. US releases scheduled for Wednesday include April figures on building permits, housing starts, the capacity utilisation rate and industrial production, while US first-quarter mortgage delinquencies and the eurozone April CPI will also be made available.
Additionally, the US Fed will release the minutes from its April meeting, which investors will watch with interest for any sign of further quantitative easing.
"These markets are going to remain volatile - data or not," the trader said. "In the short term, there will be attempts to rally and bounce, with a bit of bargain-hunting. But it does not look as if we will get a positive summer period."
COPPER THREATENS $7,600, ALTHOUGH INVENTORY SHRINKAGE CONTINUES
Copper hit $7,625 per tonne, its lowest since January 10, and then held at $7,655, still $105 down from Tuesday. Inventory data had no impact, even though stocks fell to a fresh low since October 2008 - down a net 1,000 tonnes at 215,350 tonnes.
Aluminium hit its lowest since late December 2011 at $2,007.50 before recent business at $2,028, a $3 gain.
Inventories, up sharply on Tuesday, fell 8,150 tonnes to 4,976,500 tonnes. Cancelled warrants - metal booked for removal - rose nearly 58,000 tonnes to 1,612,350 tonnes. This was due to 49,150 tonnes and 8,500 tonnes cancelled respectively in Detroit and Johor.
Zinc hit a fresh four-month low at $1,898.75 and then traded at $1,905, a $29 loss. Inventories soared by 9,925 tonnes to 942,075 tonnes, a fresh high since May 1995.
In other metals, lead declined to a fresh one-month low of $1,981.50, down $27 from yesterday, while nickel traded at $16,930, down $65. It hit $16,770 earlier, its weakest since early December.
Tin fell to a fresh four-month low at $19,600 before settling at $19,850, a $40 gain. Steel was quoted at $460/480.
In the minors, cobalt was quoted at $28,500/30,950 while molybdenum held at $28,500/30,500.
(Additional reporting by Kathleen Retourne, editing by Mark Shaw)